Venkataswamy v Kadoor
[2023] NZHC 2419
•1 September 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-002374
[2023] NZHC 2419
BETWEEN SHYLA VENKATASWAMY
Plaintiff
AND
MURALI GANESH KODOOR and GEETA MURALI GANESH
Defendants
Hearing: On the papers Counsel:
N J Scampion and M A Ashmore for Plaintiff M I S Phillipps for Defendants
Judgment:
1 September 2023
JUDGMENT OF ANDREW J
This judgment was delivered by Justice Andrew on 1 September 2023 at 4.00 pm
pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar
Date ………………………….
VENKATASWAMY v KODOOR [2023] NZHC 2419 [1 September 2023]
Introduction
[1] In my judgment of 18 May 2023, I ordered that the defendants were to pay to the plaintiff the sum of US$634,641, together with further equitable relief.1 The equitable relief and costs in the proceedings are yet to be determined. I have directed a separate remedies hearing to deal with the outstanding issues. My judgment is the subject of an appeal by the defendants to the Court of Appeal and a cross-appeal by the plaintiff.
[2] In an earlier interlocutory judgment of this Court, dated 2 November 2022, Associate Judge Sussock ordered that the defendants were to pay NZ$400,000 into the plaintiff’s solicitor’s trust account as an interim payment with the funds to remain in the plaintiff’s solicitor’s trust account until further order of the Court.2
[3]The defendants now apply for the following orders:
(a)A stay of execution of my judgment of 18 May 2023, pending determination of the appeal by the defendants to the Court of Appeal and the determination of the cross-appeal by the plaintiff to the Court of Appeal and until further order of this Court;
(b)That the sum of NZ$400,000 (together with accumulated interest) paid into the trust account of the solicitors for the plaintiff by the defendants and pursuant to an order of this Court dated 20 February 2023 remain in the plaintiff’s solicitor’s trust account pending the outcome of the appeal and further order of this Court.
[4]There is a cross and related application by the plaintiff for release of the
$400,000 interim payment currently in her solicitor’s trust account.
1 Venkataswamy v Kodoor [2023] NZHC 1189.
2 Venkataswamy v Kodoor [2022] NZHC 2737.
Factual background
[5] There is a lengthy history to this litigation set out in my judgment of 18 May 2023. In that judgment I found that the plaintiff had proven her second and third causes of action, namely breach of trust and breach of fiduciary duty. The defendants, as fiduciaries, were in breach of their duties to account to the plaintiff for substantial funds, namely a total of USD $998,551, that she had entrusted to them for investment in real estate in New Zealand.
[6] The plaintiff lives in California, USA. The defendants, old friends of the plaintiff, reside in New Zealand. All the parties are Indian nationals.
[7] The funds at issue were advanced by the plaintiff to the defendants in 2010 and 2011. The proceedings were filed in 2016.
[8] Subsequent to the judgment of this Court of 2 November 2022 granting the plaintiff’s application for interim payment of NZ$400,000, the defendants filed an application for leave to appeal. While they did not initially seek a stay, they amended their leave application to do so on 3 February 2023.
[9] In a further judgment dated 23 February 2023, Associate Judge Sussock declined the defendants’ application for leave to appeal and for a stay of enforcement of her judgment of 2 November 2022.3 She also directed that unless the defendants were to pay the interim payment of NZ$400,000 into the plaintiff’s solicitor’s trust account by 2 March 2023, their statement of defence would be struck out and the plaintiff’s claim would proceed by way of formal proof.4
[10] The defendants subsequently paid the sum of NZ$400,000 into the plaintiff’s solicitor’s trust account. The funds remain in that trust account.
Relevant legal principles
[11]Rule 12(3) and (4) of the Court of Appeal (Civil) Rules 2005 provides:
3 Venkataswamy v Kodoor [2023] NZHC 277.
4 Venkataswamy v Kodoor, above n 3, at [96(b)].
Stay of proceedings and execution
…
(3)Pending the determination of an application for leave to appeal or an appeal, the court appealed from or the Court may, on an interlocutory application,–
(a)order a stay of the proceeding in which the decision was given or a stay of the execution of the decision; or
(b)grant any interim relief.
(4)An order or a grant under subclause (3) may –
(a)relate to execution of the whole or part of the decision or to a particular form of execution:
(b)be subject to any conditions that the court appealed from or the Court thinks fit, including conditions relating to security for costs.
[12] The principles applicable to these rules are well established. In determining whether or not to grant a stay, the Court must balance the successful litigant’s rights to the fruits of a judgment and the need to preserve the position in case the appeal is successful. The factors to be considered in this balancing exercise include:5
(a)Whether the appeal may be rendered nugatory by the lack of a stay;
(b)The bona fides of the applicant as to the prosecution of the appeal;
(c)Whether the successful party will be injuriously affected by the stay;
(d)The effect on third parties;
(e)The novelty and importance of questions involved;
(f)The public interest in the proceeding;
(g)The overall balance of convenience; and
5 Keung v GBR Investment Ltd [2010] NZCA 396 at [11]; citing Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9]. See also Wootton v Wootton [2020] NZCA 478 at [9].
(h)The apparent strength of the appeal.
Analysis and decision
(a) Stay of execution
[13] The defendants contend that if there is no stay of execution, and they are ultimately successful with their appeal, they will have significant difficulty in recovering monies paid to the plaintiff because she lives in California and has no assets in New Zealand. Mr Phillipps, on behalf of the defendants, notes that they would need to make an application in California for a New Zealand judgment to be registered and is concerned that the process would be very expensive, complex and time consuming.
[14] Mr Kodoor, in his affidavit, says that he is in the hospitality industry which in the past three years has badly hit by COVID-19. To make matters worse, over 80 per cent of his hospitality business is in the Hawke’s Bay and Gisborne regions which have been very badly affected by the recent cyclone. He says that he will need to raise the money to pay out the plaintiff by selling a major asset. He is concerned that the current market is dull and banks are reluctant to lend money to enable prospective buyers to purchase property in the hospitality industry. He also contends that throughout the proceedings the plaintiff has been responsible for numerous and lengthy delays.
[15] I find that the defendants have substantially overstated their position and, in particular, their concern about registering a New Zealand judgment in California and their financial position. The overall balance of convenience clearly lies with the plaintiff.
[16] It is clear from the evidence that I heard at the substantive hearing that the defendants are, by New Zealand standards, very wealthy. They own a substantial number of properties both here in New Zealand and overseas. The charging order made on 12 June 2023 provides support for that conclusion. The extensive commercial property interests are not confined to Gisborne and Hawke’s Bay. There can also be no doubt that the defendants have benefited substantially from use of the
plaintiff’s funds over many years. The funds were originally advanced in 2010 and 2011.
[17] There is no basis for concluding that the defendants’ appeal to the Court of Appeal will be rendered nugatory by a lack of stay of execution. I note also that the defendants have some experience with litigation before the courts in California. I do not doubt that enforcement of judgment in California would be somewhat expensive, but the defendants are well placed to meet any expense and to pursue recovery there, should they be successful in the Court of Appeal.
[18] The position of the plaintiff is otherwise. In her unsworn affidavit dated August 2023, she states that she has to date spent NZ$420,527 on legal fees and US$38,670 on other costs in pursuing her claim. However, despite that she has still not received any monies. She obviously continues to incur legal fees as the case continues to “drag on”. She notes that she is in a challenging financial situation with her retirement fund now substantially depleted with only the sum of US$45,436 left (compared to a sum of US$220,208 when she started the proceedings). She says she has been funding these proceedings primarily by using that retirement fund.
[19] The plaintiff further notes that she and her husband have a significant mortgage on their home in California. She says that in 2010 they borrowed US$800,000 on that house to raise the money that they invested with the defendants (and at issue in this proceeding). The plaintiff is currently 61 years old, has major health issues and is very concerned that she may not have the funds to defend the appeal. She also notes the litigation has been ongoing now for nearly seven years.
[20] I conclude that the Court of Appeal will be able to do justice between the parties if the defendants make payment now, whatever the ultimate decision on appeal. If the defendants are successful in their appeal, they will be able to recover the judgment sum without, in my view, significant difficulties.
[21] To the limited extent that I can assess the merits of the defendants’ appeal, I find that the merits are not particularly strong. Many of my findings are based on credibility assessments which are always difficult to challenge on appeal.
[22] For all these reasons, I conclude the application for a stay of execution should be declined.
(b) Application for release of funds
[23] For essentially the same reasons as recorded above, I conclude that there should be an order releasing the payment of the NZ$400,000 from the plaintiff’s solicitor’s trust account to be paid to the plaintiff.
[24] In general, if there is an appropriate assurance of repayment if the appeal is successful, the successful party should have their money at once.6 As I have found, for the reasons above, there is an appropriate assurance in this case.
[25] I further note that the purpose of an interim payment is to cater for the situation where it is clear that the plaintiff will receive an award; there may be great unfairness in allowing the defendant to benefit at the plaintiff’s expense in the meanwhile and an interim payment may serve to alleviate this.7
[26] Having regard to the competing interests, I conclude that the funds should now be released and made available to the plaintiff.
(c) Security for costs
[27] I further find that the $14,050 paid by the defendants in February 2023 as security for the plaintiff’s costs in this Court should be paid to the plaintiff in part satisfaction of the sums owed to her. I also find that the $12,000 security and interest paid by the plaintiff in September 2020 as security for costs should be returned to her. The overall balance of convenience favours making both those two orders. It is consistent also with the principles I have addressed above, which deal broadly with the object of making sure that matters are arranged so that when the appeal comes to
6 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [CR12.01(3)]; citing Contributory Mortgage Nominees Ltd v Harris Road No 10 Ltd (2006) 22 NZTC 19,752 (HC) at [13]–[22].
7 Ricci Burns Ltd v Toole [1989] 3 All ER 478 at 485.
be heard, the appeal court may be able to do justice between the parties whatever the outcome of the appeal.8
Result
[28]The defendants’ application of a stay of execution is dismissed.
[29] The plaintiff’s application for an order releasing the funds of $400,000 from her solicitor’s trust account for payment to her is granted.
[30]I further order:
(a)The sum of $14,050 paid into the Court by the defendants in February 2023 as security for costs is to be paid to the plaintiff;
(b)Payment for security for costs in the sum of $12,000 paid into the Court by the plaintiff in September 2020 is to be returned, together with interest, to the plaintiff.
[31] The plaintiff is entitled to costs on both applications on a 2B basis plus disbursements.
Andrew J
8 Minnesota Mining & Manufacturing Co v Johnson & Johnson [1976] RPC 671 (CA) at 676; cited in New Zealand Insulators Ltd v ABB Ltd (2006) 18 PRNZ 459 (CA) at [13].
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